Ten of 11 major S&P sectors down in early trading, led by industrials and consumer discretionary stocks. On the S&P 500 and the Nasdaq, stocks of large-cap growth and technology companies such as Apple Inc, Amazon.com Inc, Tesla Inc and Nvidia Corp fell between 1% and 3.6%when benchmark US Treasury yields hit an 11-year high.
The S&P 500 technology sector plunges more than 27% so far this yearcompared to the S&P 500 index’s 21% decline. It is now 3.3% from its mid-June low, its weakest point of the year.
The interest rate hike announced this Wednesday by the United States Federal Reservewhich took her to a range of 3%-3.25%, has an impact on activity expectations, given that it makes credit more expensive and attracts funds to Treasury bonds that reach their maximum. In addition, it pointed to its official rate reaching 4.4% by the end of the year and reaching a maximum of 4.6% by the end of 2023, a steeper and longer trajectory than the markets had anticipated. Investment Management Companies warned about the possible effect of the Fed’s monetary policy on activity.
“The interest rate hike imposed on Wednesday and the more hawkish tone from the Federal Reserve will weigh on stocks in general and probably more on rate-sensitive sectors,” he said. sam stovallchief investment strategist at CFRA Research adding: “I definitely see the market testing the June lows and there is a higher probability of new lows, as indicated by the rise in the two-year yield, and the widening of the yield curve inversion. performance at two and 10 years”.
“The Fed raised interest rates by 75 basis points, as expected, and adopted a balanced but aggressive tone. Jackson Hole actually stole the limelight from this meeting, as (Fed Chairman) Jerome Powell largely reiterated the tone of his speech from back then. The Fed is committed to reducing inflation,” he said. Andrew Mullinerhead of global aggregate strategies at Janus Henderson.
“However, it was the dots that revealed the Fed’s thinking. Rates are expected to mid-4% by the end of the year (in line with markets), while rates are expected to hold at similar rates for 2023, before tapering off to a (surprisingly) flat long-term point in 2025. The Fed’s projections for unemployment and growth look optimistic given the degree of monetary tightening, but only time will tell. To what extent this is wishful thinking. Markets were relatively flat on average, but flattened sharply,” he added. muliner.
Added to this scenario is the Applications for unemployment benefits in the United States showed a slight rise during the week and broke the five consecutive periods of losses, as reported by the Bureau of Labor Statistics of the Department of Labor. Nearly 213,000 new people applied for these benefits, after being laid off. There are 5,000 new requests more than those registered the previous week. However, this figure remains at minimum levels. The Fed chair pointed out that a retraction of the conditions of the labor market is one of the prices to pay to return to stabilize the prices.